Yesterday tested the February high and the open of the month, and it reversed up in the middle of the day. The day closed just above the midpoint of the range, and therefore the bulls won the day. That reduces the chance of a big bear day today.
The month closes on Friday. If the month has even a small bear body, there will be an increased chance of lower prices in November. The bulls obviously do not want this, and they therefore will try to get the month to close above the open of the month.
Yesterday collapsed for the first half of the day, but spent half of the day around the open of the month. That tells traders that the open of the month could be important all week. It therefore increases the chances of sideways trading this week.
Yesterday broke below a small wedge bull flag on the daily chart. Today is the follow-through day. The more bearish today is, the more likely the will begin a swing down.
If today instead is a bull day closing near its high, traders will suspect that the bear breakout failed. They then will look for a reversal up to the Oct. 12 lower high.
What is most likely? As I said, the E-mini spent a lot of time around the open of the month yesterday. That increases the chance of a sideways day today. Since yesterday’s range was big, today could be an inside day.
Overnight E-mini Globex Trading
The E-mini is up 9 points in the Globex session. As strong as yesterday’s selloff was, the 5-minute chart was in a trading range for the final 5 hours. It broke above the top of the range in the final hour. The bulls are hoping that the breakout will lead to a measured move up today. That would be near the 20-bar EMA on the 60-minute chart and yesterday’s high.
The day after a sell climax usually has a lot of trading range trading. Traders decide if the selloff was just a sell vacuum test of support (here, the open of the month) or the start of a bear trend.
With yesterday closing in the middle, traders are neutral. That increases the chance of a trading range day today. There will probably be at least one swing up and one swing down. The open of the month and yesterday’s low are magnets below, and the EMA on the 60-minute chart and yesterday’s high are magnets above.
With yesterday’s range being big, even if today is a trading range day, the legs will be big enough to swing trade. While a trend day is less likely, if there is a series of strong trend bars in either direction, traders will swing trade. But they know that the trend will probably only be a strong leg in what will likely be a trading range day.
Here are several reasonable stop entry setups from yesterday. I show each buy entry with a green rectangle and each sell entry with a red rectangle. I rarely also show limit order entries and entries on the close of bars. I do not want the lines to be distracting. If they are longer, I make them dotted. But, they have to be visible, so I make the shorter ones solid. Buyers of both the Brooks Trading Course and Encyclopedia of Chart Patterns have access to a much more detailed explanation of the swing trades for each day (see Online Course/BTC Daily Setups).
My goal with these charts is to present an Always In perspective. If a trader was trying to be Always In or nearly Always In a position all day, and he was not currently in the market, these entries would be logical times for him to enter.
If the risk is too big for your account, you should wait for trades with less risk or trade an alternative market like the Micro E-mini.